China Steel mulls capital injection at subsidiaries

STEELY RESOLVEThe board of the company also agreed to subscribe to as many as 360 million shares issued by Chung Hung Steel to help it out financially

By Kevin Chen / STAFF REPORTER

Defying the downward trend in the industry, China Steel Corp (中鋼), the nation’s largest and only integrated steelmaker, yesterday announced plans to inject capital into two of its subsidiaries and to earmark funds for a refinery upgrade at one of its plants.

The Kaohsiung-based steelmaker will subscribe to new shares issued by Dragon Steel Corp (中龍) for a total of NT$21.2 billion (US$641.9 million), the company said in a filing with the Taiwan Stock Exchange yesterday.

China Steel’s board approved earlier in the day a plan to purchase 2 billion new common shares issued by its wholly owned subsidiary Dragon Steel at NT$10.60 each, it said.

To improve competitiveness, China Steel in 2004 announced it would help Dragon Steel build two blast furnaces in Taichung, which would become the nation’s second integrated steel mill.

Construction of the furnaces is scheduled to be completed in October and with an annual output of 2.5 million tones, the steel mill is expected to start mass production by the end of next year, Dragon Steel said in May.

“Considering the effectiveness of its fundraising, Dragon Steel intends to issue shares via a private placement with China Steel, the prospective investor to purchase all the shares issued,” the filing said.

Private placement refers to the sale of a large tranche of securities to a small group of investors.

China Steel’s board yesterday also agreed to subscribe as many as 360 million shares issued by Chung Hung Steel Co (中鴻), in which China Steel holds a 23.57 percent stake to help strengthen the latter’s financial structure and fortify its market presence in Taiwan, the company said in a separate filing.

The purchase will cost China Steel NT$5.4 billion based on Chung Hung’s closing price of NT$9.02 per share yesterday.

Meanwhile, China Steel would invest NT$2.13 billion between Jan. 1, 2009 and June 30, 2012, to enhance the refining quality of steel products at one of its plants in Taiwan.

The company said 77.28 percent of the investment would come from its own coffers, with the remainder funded by long-term bank loans.

The plant, known as an RH furnace, will remove carbon dioxide and other gases from products made at its proposed No. 3 cold-rolled steel plant, Bloomberg said, citing China Steel executive vice president Chung Lo-min (鍾樂民).

Shares of China Steel dropped 1.71 percent to NT$23 before the company released its investment plans.